Pakistan’s Energy Crisis
By Burhan Ali Irman
Pakistan is a country with great geo-strategic importance and abundant resources. It has all the required potential to develop rapidly by utilizing these resources efficiently. Like in the energy sector Pakistan has an impressive portfolio of energy mix. It has great scope in both renewable and nonrenewable energy sources. Yet as we see the current situation is quite opposite of the possibilities. Pakistan is unable to utilize these resources properly. The current energy shortfall is around 3000 MW. The installed capacity of power generation is 22000 MW while the requirement is around 25000 MW. Around 40% population had no excess to electricity in 2010. There are around 20 power sector organizations in the country like WAPDA, PEPCO, PPIB, GENCO etc. despite these there is government failure in power sector. There is lack of research and proper budget allocation for energy sector. Over the time there has been more focus on nonrenewable sources than renewable sources. Majority of power is import dependent as furnace oil in being imported. Due to this international price fluctuations effect the domestic cost of production in energy sector.
At the time of independence Pakistan had around 50 to 60 MW capacity of power generation for a population of around 33 million. Karachi electric supply company was the major entity in the generation, transmission and distribution of electricity in the economy. The major sectors were industrial, commercial, residential and agricultural. Water and power development authority (WAPDA) was established in 1958 which was responsible to maintain the power sector of the country. In 1960 the capacity was increased to 119 MW with the installation of hydel and thermal power plants. It rose to 1331 MW in 1970, 3000 MW in 1980 and 7000 MW in 1990. The problem was that electric consumption increased in excess as compared to the economic growth. The reasons were urbanization and rural electrification. The energy crisis started in the mid of 1980s where the annual demand exceeded the capability to supply.
The shortfall of electricity was around 1500 MW. At that time WAPDA and K-electric were the two major public sector organizations which were responsible for generation transmission and distribution of electricity in the country. Hydel power was the major source of power generation. In the scenario of shortfall, the government didn’t choose to improve or upgrade the government owned power generation rather they opted to privatize the power sector. This shift in policy created room for private sector investment. The concept of independent power producers (IPPs) emerged. Hub power project (1292 MW) was the first private power project. The power policies of 1994, 1998 and 2002 changed the energy mix drastically. In 1980s 60% energy generation was hydro while 40% was thermal while in 2010 it was 70% thermal and 30% hydro due to IPPs preferring thermal power generation.
The 1994 policy got great appreciation from overseas investors are there profits are guaranteed and secured. Internationally it is declared on of the best power policies formulated in the world. This policy without any doubt resolved the power crisis but it was beneficial in short term. In the long run it had destructive consequences on the economy.
The 1998 policy however failed to attract investors like the previous policy which forced the government to rethink about the policy and adapt new measures to boost private investments in the power sector. Still no efforts have been made to initiate renewable energy resources.
The 2002 policy started the debate to work on the scope of renewable energy sources. Like previous policies it also urged to convert power production from oil to coal and hydel which have great prospects in Pakistan. IPPs followed the imported oil-based production where they charged higher tariffs.
The power policies of Pakistan clearly reflect that they were unable to shift the private sector from oil-based power production to hydel, coal or renewable energy sources. The IPPs have profited in every sense from the policies. Government have purchased expensive energy from these IPPs, and end consumer have suffered a lot. Like in 2010 The power production of WAPDA from hydro cost Rs 1.03/kwh. The public sector thermal power cost was Rs 8.5/kwh. On the other hand, IPPs produced at Rs 9.58/kwh. Hence the average cost was Rs 6.6/kwh, but the actual end user cost was around Rs 10/kwh due to costs caused by line loses and theft. This shows that the energy is quite expensive with oil-based production system.
Since the power shortfall of mid 1980s Pakistan lacks a long-term effective power policy which can assure sustainable energy generation. According to the latest report 16 out of 17 IPPs under the 1994 power policy which invested about Rs 50.8 billion have earned a profit of more than Rs 415 billion and dividend of more than Rs 300 billion. They have earned about 18 times of their investment and 22 times of dividend on investment with low level of risk associated and guaranteed payback by the government. Artificial cost had been incurred by IPPs to manage higher tariffs from NEPRA. Report suggests the retirement of most IPPs established under the policy of 1994 and shift the base tariff from dollar to PKR to avoid variation in cost due to devaluation of rupee.
Pie chart of power generation in the country.
There are multiple options to boost the energy capacity of Pakistan. Some of these resources are cheap, safe and abundant in the country. These include hydel, coal, solar, wind, biogas and nuclear energy. Pakistan must invest in renewables to cover energy shortfall.
The estimated potential of hydro power production is about 50000 MW. Efficient utilization of water resources alone can provide solution to the problem. Over the first three decades Pakistan has invested in hydro powers as dam like mangla (1000 MW) and tarbela (3046 MW) are constructed. After 80s there have been no significant investment in this field as focus shifted to thermal power production from oil.
Pakistan has one of the biggest coal reserves in Thar Sindh. It is about 175.5 billion tones. Apart from that coal reserves are discovered in other provinces as well. These reserves have potential to produce around 100,000 MW of electricity for 30 years. As we see the historical data the developed countries had large share of coal in the energy mix like UK. China also utilized coal in the rapid development era. Our country needs to invest and improve technology to properly utilize this resource. Currently Pakistan is developing its nuclear capacity. The Chashma plant is producing 220 MW. Fuel is being imported for nuclear reactors. Pakistan is planning to extract uranium ore domestically with the help of china. The process in underway.
Geographically Pakistan lies in the region where solar irradiance is high. It is well suited for solar energy production. Pakistan is showing progress in installing photovoltaic cells to produce solar electricity. Estimated photovoltaic power is about 1600 GW per year which will provide 3.5 Pwh electricity. A vast area of Pakistan located with the sea has potential to produce wind energy. The southern part of Sindh and Baluchistan are significant where steady wind flows at about 5-7 m/s. The coastline area is about 1000 km. the estimated power generation from wind in Pakistan is far greater than the neighbour countries About 50000 tons of solid waste, 225000 tons of crop residue and over 1 million tons of animal manure is produced in Pakistan on daily basis. From this waste about 17 billion cubic meter gas can be produced which can produce more than 100 Twh electricity. The fibrous residue of sugar cane can also be used in this process of energy production.
Analysing the energy sector of Pakistan there is great potential. We are very much blessed as a nation in terms of resources. We need to revisit our policies and must come up with new ones to efficiently utilize the resources. Good governance is another key to tackle the issues of energy sector. Lots of improvement is possible in the transformation and distribution of energy. We need to switch from imported oil-based production to renewable energy sources. The concept of green energy is inevitable for a secured future of the country. We need to invest more on technological improvement in the energy sector. In this way more energy production will boost economic activity which in terms will contribute to economic growth of our beloved country.
